Car taxation: the Commission takes the next
step in the infringement procedure against Romania

The Commission has taken the second step in the
infringement procedure against the Republic of Romania regarding its car
registration tax, which discriminates against second-hand cars brought into the
Romanian territory from other Member States. Further to the letter of formal
notice sent by the Commission in spring 2007 (IP/07/372)
and to the unsatisfactory reply of the Romanian authorities, the Commission has
issued a reasoned opinion, formally requesting Romania to change its
legislation. If the relevant national rules are not amended in order to comply
with the reasoned opinion within a two-month deadline, according to article 226
of the EC Treaty the Commission may decide to refer the matter to the European
Court of Justice.

In spring of 2007 by means of a letter of formal notice the Commission
signalled to the Republic of Romania the conviction that its national rules on
car registration tax were incompatible with Article 90 of the EC Treaty. Romania
failed to provide satisfactory arguments in its reply and, despite intensive
discussions with the Commission, did not modify the contested legislation.

Consequently, the Commission has issued a reasoned opinion formally
requesting Romania to bring this infringement to an end. Should Romania fail to
comply with the reasoned opinion within the prescribed two-month time limit, the
Commission may bring this case before the European Court of Justice.

Background

The European Court of Justice
(ECJ) has consistently held that Member States may levy registration taxes on
second-hand imported cars provided that the tax is in conformity with Article 90
of the EC Treaty. This means that a Member State must not impose higher taxes on
the products of other Member States than on similar domestic goods.

The Court has been clear that registration tax paid on a new vehicle forms a
part of its market value and that Member States, thus, must take account an
actual depreciation in car's value into when calculating the amount of tax due.
(see ECJ cases Nunes Tadeu, C-345/93; Commission v Denmark,
C-47/88; and Commission v Hellenic Republic, C-375/95)

The following example illustrates the application of these rules:
registration tax on a x years old car imported in one Member State cannot exceed
the amount of duty included in the residual value of a similar used vehicle
registered x years ago in that Member State.

Under the Romanian legislation, the tax due on used motor vehicles is not
abated in line with the actual depreciation of similar cars already registered
on the domestic market. On the contrary, the tax amount is increased on the
basis of the car's age alone. Given that the Romanian car registration tax is
levied only once, imported used cars, by default, fall within the most heavily
taxed category. In the Commission's opinion, such tax application modalities are
contrary to Article 90 of the EC Treaty as interpreted by the ECJ.For
information on EU activities in the field of car taxation see: